Latest Wharton Global Family Alliance and IESE Business School Single Family Office Survey Benchmarks Key Factors That Contribute to “Quality” SFOs

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15% of SFOs report positive returns despite economic downturn

PHILADELPHIA, PA, BARCELONA, November 30, 2009 — The Wharton School of the University of Pennsylvania and IESE Business School, announced the publication of the Wharton Global Family Alliance (Wharton GFA) follow-up survey on Single Family Offices (SFOs). The study provides insights into SFO operations and key factors for SFO success. Among the findings, the study shows that despite the past year’s economic crisis, 15 percent of respondents’ SFOs actually achieved positive returns from mid-2008 through mid-2009.

SFOs are highly private professional organizations that attend to wealth management and personal services for ultra high net worth families. Notable about the survey is its benchmarking of “quality” SFO attributes. By associating SFO management practices to performance, the survey concludes that traits of better-performing or “quality” SFOs include:

  • Hiring in-house wealth management staff and implementing more active governance via committees (e.g. audit, investment, management). European SFOs typically are more closely managed and are better performing than American SFOs.
  • Providing an “entrepreneurial mindset” that offers in-house staff incentives such as cash bonuses, profit sharing and co-investing opportunities. According to the survey, these incentives “transform the profile of the [SFO] manager from a pure administrator to an actively-involved and interested entrepreneur.”
  • Placing an emphasis on succession planning and education for successor generations. The survey’s quality index shows a direct linkage between SFO-organized educational programs and a transfer of knowledge that helps ensure the SFO remains high performing. The report notes that families which treat successor generations inclusively “are happier than others as they…balance their personal wealth with entrepreneurial creativity, philanthropy and leadership in society.”

“As a follow up to our 2008 survey this study goes even further, for the first time, benchmarking Single Family Office financial performance, governance and management with a granularity that we expect will prove highly useful to families worldwide,” said Prof. Raphael (“Raffi”) Amit, Chairman of the Wharton GFA Executive Committee. “At least two factors make this survey significant: 1) high level of participation by leading wealthy families and 2) the academic rigor in implementing the study, made possible through our strong research partnership with IESE.”

“This research contains several surprises,” explains Prof. Heinrich Liechtenstein, of IESE’s Financial Management Department. For example, he says, “Contrary to the widely-spread assumption that investors who outsource have a higher performance, our study actually showed quite the opposite. SFOs with higher control of the family’s wealth and whose employees had a higher involvement in all operations had a much better performance than those who did outsource.”

The survey, one of the largest and most diverse of its kind ever completed in the SFO space, analyzes 167SFOs based around the world. Of the participating families, all manage at least U.S. $100 million in investable assets with about half of the participating family offices managing more than $1 billion.

The study is one of a series produced by Wharton GFA. Wharton GFA is a collaboration between Wharton School faculty and family businesses aimed at developing in-depth academic research focused on family firms in the areas of governance, philanthropy and wealth management.

The Single Family Office survey and all Wharton Global Family Alliance research papers, case studies and other materials are available on the Wharton GFA website: www.wgfa.wharton.upenn.edu. The survey is also available on IESE’s Web site:  http://www.iese.edu.

About the Wharton Global Family Alliance and the Wharton School
The Wharton School of the University of Pennsylvania — founded in 1881 as the first collegiate business school — is recognized globally for intellectual leadership and ongoing innovation across every major discipline of business education. The most comprehensive source of business knowledge in the world, Wharton bridges research and practice through its broad engagement with the global business community. The school has more than 4,900 undergraduate, MBA, executive MBA, and doctoral students; more than 9,000 annual participants in executive education programs; and an alumni network of 85,000 graduates.

The Wharton Global Family Alliance develops in-depth academic research focused on family businesses, primarily in the areas of governance, philanthropy, and wealth management. We focus our rigorous scholarly research in combination with the practical experience of successful global families to highlight the social impact of families worldwide. Wharton GFA has a robust research agenda and a wide variety of outreach activities focused on a global audience.

Since its formation in January 2004 through an agreement between the Wharton School and CCC Alliance, the Wharton GFA has rapidly become the premier knowledge leader in family business research in the areas of wealth management, philanthropy, and family business governance.

About IESE Business School
IESE, the business school of the University of Navarra, is one of the world’s top ten business schools and has pioneered business education in Europe since its founding in 1958 in Barcelona. IESE distinguishes itself in its general-management approach, extensive use of the case method, international outreach, and emphasis on placing people at the heart of managerial decision making. With a truly global outlook IESE, with campuses in Madrid and Barcelona, a center in New York and offices in Munich and Sao Paolo, currently runs programs on four continents. For more information, please visit http://www.iese.edu.


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